Question
Assume that Tahir is a businessman and his business is registered in the title of Tahirs Machine Shop. Similarly, Tahir is considering purchasing a new
Assume that Tahir is a businessman and his business is registered in the title of Tahirs Machine Shop. Similarly, Tahir is considering purchasing a new machine for his business, but he is unsure if it is the best use of the funds at this point in time. With the new $100,000 machine, Tahir will be able to take on a new order that will pay $20,000, $30,000, $40,000, and $40,000 in revenue. Furthermore, Tahir can compare this investment to other investing opportunities to see if it makes sense to spend $100,000 on this piece of equipment or investment the money in another venture. Required: (a) Calculate Internal Rate of return (IRR)? (b) Also interpret the final value of IRR in your own words?
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